Smart business owners plan and execute a tax strategy throughout the year. It avoids the painful situation of waiting until tax season is right around the corner, preparing your taxes, and only then finding out how much damage has been done.
With tax season behind us, business owners everywhere can now breathe a “sigh” of relief. What’s next?
With the summer season in full bloom, it’s too easy to forget about your small business’ bookkeeping needs and go enjoy the sunshine instead. However, while taxes and finances are still fresh in your mind, why not kick start post-tax season period by tax planning for 2020?
If you’re not quite sure where to start, here are 5 tips to make tax planning seamless next year.
1. Plan Ahead With a Post-Mortem Meeting
Much like organizing a debrief session with your client and team at the end of a project, a tax season post-mortem can guide you to plan ahead, arming you with the right perspective and tools for the following year. Recount what you have learned from the previous tax season; ask yourself questions such as:
- What went right this tax season?
- Are there actions that could I have done differently? What about next year?
- Which areas could have been more efficient? (For example, did I optimize my eligible tax deductions or did I lose receipts throughout the year?)
A solid check-in with yourself, and your team to understand lessons learned can provide extraordinary benefits (like the “ah-ha” moment) to tax season the following year. Of course, if you haven’t already separated your business and personal expenses, right now is a good time to start!
2. Stay Current — In Record Keeping (We Don’t Mean the News)
Unfortunately, record keeping is not deadline-sensitive. As a result, many small business owners tend to push it off until it’s too late. Think – it’s going to be hard to recall every single expense! Consider record keeping regularly to change things up. Organize a weekly or monthly time block in your calendar to set aside time to do bookkeeping. You could even make it a lunch session with a teammate or another freelancer to keep things interesting!
Stay on top of tax planning with Kashoo: We created Kashoo 2.0—so that you no longer have to worry about forgetting to track your income and expenses.
Kashoo 2.0 connects with your bank and credit feeds so that all your business transactions get pulled into the Inbox workspace. From there, all you need to do is review it monthly (or even every couple of months) to make sure the categorization is done correctly.
We’ve also built in OCR which means as long as you take a photo of your receipts, you can just drag and drop them into Kashoo and we’ll automatically match them to the correct transactions. It doesn’t get anymore effortless than that!
3. Analyze Variations in Your Current and Previous Returns
Analyze and compare your tax returns to discover areas for improvement. Post-tax season, a good way to start is to reflect on questions like:
- Was there any difference in my return this year, compared to the year prior? How about three years ago?
- Were there tax deductions that I could claim normally, but did not this year?
By comparatively analyzing your returns, you may just discover ways to improve your tax situation, and ultimately, your business.
4. Understand Where Your Cash is Coming From (and Where It’s Heading)
It’s post-tax day (or week) and you’ve just spent some much-needed quality time with your finances. Thankfully, your headaches are slowly going away. As surprising as it may sound, too many business owners struggle to understand cash flow and what it means for their businesses. Use a familiar period like post-tax season to sit down and understand where your cash is coming from and where it’s being spent.
Stay on top of tax planning with Kashoo: Running reports in Kashoo’s Workspace is easy. Your income statements (categorized by each account) and unpaid invoices or unpaid bills (categorized by client) can be tracked using our software. Running financial reports are key to understanding where your cash comes from, where it goes, and how you can ultimately improve cash flow. If you’re already tracking your income and expenses consistently throughout the year, you’re more than likely to already have a good grip on your company’s cash flow.
5. Switch to the Cloud
Are you guilty of storing receipts away in your wallet for later, only to accumulate dozens of illegible receipts and other documents in there? If this is you, don’t let 2021 be the same.
Stay on top of tax planning with Kashoo: With Kashoo, you can take photos of all your receipts drag and drop it into the Kashoo Inbox. Since both the CRA and IRS accept digital copies of receipts, switching your bookkeeping to the cloud enables you to optimize your time and record keeping in general. Never have to worry about losing old receipts or invoices. With Kashoo, we make it easy for you to stay organized!